Cuba waits anxiously for oil dreams to materialize

It was supposed to be Cuba's economic savior: vast untapped reserves of black gold buried deep under the rocky ocean floor.

"Assuming they're successful in finding oil, to bring the oil to market will take years of development efforts," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore.

Once an exploratory well finds oil, companies generally drill between 10 and 20 additional wells nearby to get a sense of the reservoir's size. The process can take several years even under normal circumstances, and circumstances are not normal in Cuba.

The Scarabeo-9 was built in Asia with less than 10 percent U.S.-made parts to avoid violating Washington's embargo, making it the only rig in the world that meets the requirement. That means no other rig could be used in Cuba without risking U.S. sanction, and the additional wells would have to be drilled by the rig one at a time, with each taking about 100 days to complete. At about three wells a year, it could take up to six years for this second phase - assuming the rig is available.

After gauging a reservoir's size, an oil company then must assess whether the economics of a field make it a prime spot for exploitation, or whether to concentrate resources elsewhere.

If exploitation does go forward, complicated equipment is required to pull oil from such depths. Several industry experts said the only country that produces the necessary apparatus is the United States, although Brazil and other countries are working to catch up. Unless they do, the oil could not be removed unless the U.S. embargo was lifted or altered.

"A lot of folks are looking at the energy sector in Cuba because they are looking at a Cuba of five years from now, or 10 years from now," said Pinon. "So a lot of people are betting that either the embargo is going to be lifted, or the relationship between the U.S. and Cuba is going to improve in some way."

Still, the benefits of hitting a gusher would be enormous for Cuba, and the impact could be felt long before any oil was pumped.

Because of the embargo, Cuba is shut off from borrowing from international lending institutions, and the island's own poor record of repayment has left most other creditors leery. Cuba, for instance, owes the Paris Club of creditor nations nearly $30 billion.

An oil find could change the game, with Cuba using future oil riches as collateral to secure new financing, economists say. They point to China and Brazil as potential sources of new funding, but say neither is likely to put money into the island without reasonable confidence they will get their investment back.

Lee Hunt, the recently retired president of the Houston-based International Association of Drilling Contractors, said the stakes are enormous for Cuba that one of the wells hits oil before the Scarabeo-9 leaves. Hunt has worked to bring U.S. and Cuban industry and environmental groups together.

"If the only rig you can work with is gone, it's like somebody took your shovel away," Hunt said. "You are not going to dig any holes without a shovel, even if you know the treasure is down there."